1.

The accounting information system serves three basic functions:

 To collect and process data,
 To provide information to decision-makers within the organization and
 To see that accounting personnel records information accurately and protects the data.

2. Difference between manual and computerized accounting:-

Basis for Manual Accounting Computerized Accounting

Comparison
Manual Accounting is a system of Computerized Accounting is an accounting
accounting that uses physical registers system that uses accounting software, for
Meaning
and account books, for keeping recording financial transactions
financial records. electronically.

Recording is possible through book of Data content is recorded in customized

Recording
original entry. database.

All the calculation is performed Only data input is required, the calculations
Calculation
manually. are performed by computer system.

Speed Slow Comparatively faster.

Adjusting entries It is made for rectification of errors. It cannot be made for rectification of errors.

Entries of transactions can be saved and

Backup Not possible
backed up

Instant trial balance is provided on daily

Trial Balance Prepared when necessary.
basis.

Financial It is prepared at the end of the period, or

It is provided at the click of button.
Statement quarter.

3. Importance of studying Accounting Information Systems.

An accounting information system is typically a computerized accounting program that
keeps records for a company. The information is entered into the system and the system
tracks and organizes the accounting information.
4. An accounting information system (AIS) is a system of collecting, storing and processing
financial and accounting data that are used by decision makers.

5. Typically an AIS is composed of three major subsystem

1. Transaction Processing System (TPS) -that supports daily business operations
2. General Ledger System and Financial Reporting System (GLS/FRS) and
3. The Management Reporting System (MRS)
6. computer based information systems: This is a type of system that uses computers to collect,
process, store, analyze and distribute information for a specific purpose, such as meeting a
business objective

There are four basic types of computer-based information Systems:

 Transaction Processing Systems (TPS)

 Management Information Systems (MIS)
 Decision Support Systems (DSS)
 Executive Support Systems (ESS)

7. There are five main components in an accounting system the five components are:
I. Source documents,
II. Input devices,
III. Information processors,
IV. Information storage, and
V. Output devices.
8. Principles of Accounting System are:

A. Cost Effectiveness

accounting information must be cost-effective.

It must outweigh information cost. If the accounting information system is cost-

effective, it can provide desired output and if flexible, it can contribute much

in achieving the objective of a person or an organization.

B. Useful Output / Necessity

accounting information system must be able to provide a necessary result.

Working information must be understandable,

relevant, reliable, timely and accurate. The designer

of information system will always take the necessity

and knowledge of accounting information users into consideration.

C. Flexibility

In accounting information system there must be

provision for inclusion of changed information needed by different users.

This system must be adequately flexible so that it can meet changed demand.
9. Nm
10. Stages of the Data Processing Cycle:

A. Collection is the first stage of the cycle, and is very crucial, since the quality of data
collected will impact heavily on the output. The collection process needs to ensure that
the data gathered are both defined and accurate, so that subsequent decisions based on
the findings are valid. This stage provides both the baseline from which to measure, and
a target on what to improve.
B. Preparation is the manipulation of data into a form suitable for further analysis and
processing. Raw data cannot be processed and must be checked for accuracy.
Preparation is about constructing a dataset from one or more data sources to be used for
further exploration and processing. Analyzing data that has not been carefully screened
for problems can produce highly misleading results that are heavily dependent on the
quality of data prepared.
C. Input is the task where verified data is coded or converted into machine readable form
so that it can be processed through a computer. Data entry is done through the use of a
keyboard, digitizer, scanner, or data entry from an existing source. This time-
consuming process requires speed and accuracy. Most data need to follow a formal and
strict syntax since a great deal of processing power is required to breakdown the
complex data at this stage. Due to the costs, many businesses are resorting to outsource
this stage.
D. Processing is when the data is subjected to various means and methods of
manipulation, the point where a computer program is being executed, and it contains
the program code and its current activity. The process may be made up of
multiple threads of execution that simultaneously execute instructions, depending on
the operating system. While a computer program is a passive collection of instructions,
a process is the actual execution of those instructions. Many software programs are
available for processing large volumes of data within very short periods.
E. Output and interpretation is the stage where processed information is now
transmitted to the user. Output is presented to users in various report formats like
printed report, audio, video, or on monitor. Output need to be interpreted so that it can
provide meaningful information that will guide future decisions of the company.
 F. Storage is the last stage in the data processing cycle, where data, instruction and
information are held for future use. The importance of this cycle is that it allows quick
access and retrieval of the processed information, allowing it to be passed on to the next
stage directly, when needed. Every computer uses storage to hold system and
application software.
11. Advantage of manual accounting system
 Error Correction
 Always Accessible
Disadvantage of manual accounting system
 More Frequent Data Entry Errors
 Potential Loss of Physical Copies
 Knowledge of Accounting Procedures
Advantage of computerized accounting

 Simplicity
 Reliability
 Cost-Effectiveness
 Ability to Collaborative

Disadvantage of computerized accounting system

 Potential Fraud
 Technical Issues
 Incorrect Information
12. Difference between data and information

Data Information
Data is raw, unorganized facts that need to be When data is processed, organized, structured or
Meaning processed. Data can be something simple and presented in a given context so as to make it
seemingly random and useless until it is organized. useful, it is called information.
The average score of a class or of the entire
Example Each student's test score is one piece of data. school is information that can be derived from
the given data.
13. differentiate between system and subsystem
A subsystem is a system. A system is a set of interacting or interdependent component parts
forming a complex/intricate whole. A system is an independent performing entity while a
component is not, the boundary is quite soft.
14. the most important activities performed by accountants are:
1) Accounting systems and Financial Reporting- is a specialized branch of accounting that
keeps track of a company's financial transactions. Using standardized guidelines, the
transactions are recorded, summarized, and presented in a financial report or financial
statement such as an income statement or a balance sheet.
2) Long-Term strategic planning: objectives are addressed in the business plan, which
defines the company's vision, mission and objectives.
3) Managing the accounting and finance function: They oversee the financial strategy,
health of the business, and manage the rest of the financial department
4) Internal consulting: to improve the performance of the company/organization.
5) Short-term budgeting: Is a process of planning organization's operating activities stated in
quantitative terms
6) Financial and economic analyses: estimate the net-benefits of a project investment based
on the difference between the with-project and the without-project situations
7) Process Improvement: is the proactive task of identifying, analyzing and improving upon
existing business processes within an organization for optimization and to meet new
quotas or standards of quality.
8) Computer systems and operations
9) Performance evaluation of the organization: The specific operational goals establish the
basis for developing the organization's strategy and performance measures that support its
purpose.
10) Customer and product profitability analyses: is the profit the firm makes from serving a
customer or customer group over a specified period of time, specifically the difference
between the revenues earned from and the costs associated with the customer relationship
in a specified period.
15. Factors influencing design of the AIS

 System cost: Budget is often the first consideration in accounting system design and

selection.

 Access controls: An accounting system needs appropriate controls to minimize mistakes

and fraudulent activities. System access controls dictate which users have access to what

information.

 Accounts complexity: Virtually every company will have assets, liabilities and

stockholder's equity. However, the specific accounts and subaccounts depend on the

business industry and size of the company.

 Accounting basis: The design of the accounting system changes depending on what

basis of accounting is used.

16. A value chain is a set of activities that a firm operating in a specific industry performs in

order to deliver a valuable product or service for the market.

Components of organization’s value chain categorized as primary and secondary activities

 Primary activities include Inbound Logistics, Operations, Outbound Logistics,

Marketing and Sales, and Service.

 Secondary activities include Procurement, Human Resource management, Technological

Development and Infrastructure.

17. ….
18. How an AIS can add value to an organization
a) Improve the quality and reducing the cost of products and services
 Reduces the amount of wasted materials and the cost of having to anything
b) Improve efficiency
 Providing more timely information
c) Sharing knowledge
 Improve operations and even providing a competitive edge
d) Improve the efficiency and effectiveness of its supply chain
 Can reduce the cost of sales and marketing activities
e) Improve the internal control structure
 Can protect systems from problems such as fraud, errors, equipment and software
failures and natural and political disasters
f) Improving decision making
 Identifies situations requiring management actions

19. Resources: a stock or supply of money, materials, staff, and other assets that can be drawn
on by a person or organization in order to function effectively. Example: wealth, money,
capital etc…
Events: a thing that happens or takes place, especially one of importance. Example: a
planned public or social occasion.
Agents: a person who acts on behalf of another person or group. Example: representative,
negotiator, spokesperson
20. Characteristics of useful information’s are:-

1) Accuracy: Information needs to be of high quality to be useful and accurate. The

information that is input into a data base is presumed to be perfect as well as accurate.

The information that is accessed is deemed reliable. Flaws do arise with database

design but do not let something in your control, accurate and reliable data, be one of

them. A database design that is accurate and reliable will help achieve the

development of new business ideas as well as promoting the organizational goals.

 2) Completeness: Partial information may as well be incomplete information because it

is only a small part of the picture. Completeness is as necessary as accuracy when

inputting data into a database.

3) Consistency: is key when entering information into a database. For example, with a

column for a phone number entry 10 digits is the expected length of the field. Once

the fields have been set in the database, a number more or less than 10 digits will not

be accepted. The same applies for any field, whether it is an entry that requires a

number, a series of numbers, an address, or a name, etc. If the fields are not set to a

specific limit for information then consistency is even more important.

4) Uniqueness: In order to add value to any organization, information must be unique

and distinctive. Information is a very essential part of any organization and if used

properly can make a company competitive or can keep a company competitive.

5) Timeliness: New and current data is more valuable to organizations than old outdated

information. Especially now, in this era of high technological advances, out-of-date

information can keep a company from achieving their goals or from surviving in a

competitive arena. The information does not necessarily need to be out of date to have

effect; it just needs to not be the most current. Real-time information is an element of

timeliness.

21. Decision making: is the process of making choices by identifying a decision, gathering

information, and assessing alternative resolutions.

Step 1 State the Problem or Stating Your Goal: Identify the problem. Until you have a clear

understanding of the problem, goal, or decision to be made, it is meaningless to proceed. If the

problem is stated incorrectly or unclearly then your decisions will be wrong. Be as specific as

you can.

Step 2 Gather Information for Weighing Your Options: When making good decisions it is

best to gather necessary information that is directly related to the problem. Doing this will help

you to better understand what needs to be done in solving the problem, and will also help to

generate ideas for a possible solution.

Step 3 Consider the Consequences: This step can be just as important as step one because it

will help you determine how your final decision will impact yourself, and/or others involved. In

this step, you will be asking yourself what is likely to be the results of your decision. How will it

affect you now? And how will it affect your future? How will it affect others around you, always

keeping in mind that this is for you?

Step 4 Make the Decision: You have identified your problem or your goal. You've gathered all

of the possible information, gotten information from the experts, and weighed the consequences.

Now it's time to make the choice. You've gotten rid of all the alternatives that are silly or not

practical or simply do not fit.

Step 5 Evaluate the Decision: A decision has no value unless you put it into action. If you are

not good with taking action steps, then find someone that is to help you. Part of the

implementation phase is the follow up. The follow up ensures that you're following up!
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23. …
24. Value of information is the amount a decision maker would be willing to pay for

information prior to making a decision.